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Are Direct Bidders Losing Interest in Four-Week Treasury Bills?

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Four-week Treasury bills on March 29

The US Department of the Treasury conducted its weekly auction of four-week Treasury bills, or T-bills, on March 29. The issuance was $45 billion, or $10 billion lower than the previous week.

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Overall demand down

The bid-to-cover ratio for these bills, which depicts overall demand, fell from 3.6x to 3.3x one week previously. The year-to-date coverage of the one-month T-bills auction has averaged 3.4x, whereas it averaged 4.1x for all auctions held in 2015.

The high discount rate for the March 29 auction came in at 0.2%—the lowest level since the auction on January 12, 2016. The high discount rate stood at 0.27% one week previously.

Market demand fell

Market demand for four-week Treasury bills on March 29 dipped from the previous week, dropping from 41.0% to 38.0%. The percentage of accepted indirect bids nudged up from 32.2% to 33.6% week-over-week. Indirect bids include bids from foreign governments.

Domestic investor interest in the auction fell from the previous week as the percentage of direct bids were down from 8.9% to 4.5% week-over-week. Direct bids include domestic money managers like BlackRock (BLK) and Wells Fargo (WFC).

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The share of primary dealers rose from 59.0% one week previously to 62.0% on March 29. Primary dealers are a group of 22 broker-dealers, all authorized by the Fed, that are obligated to bid at US Treasury auctions and take up the excess supply. They include firms like J.P. Morgan Chase (JPM) and Morgan Stanley (MS).

Investment Impact

We should note here that the MassMutual Select Strategic Bond Fund Class A (MSBAX) and the J Hancock Government Income Fund Class A (JHGIX) were each up by 0.5% on a week-over-week basis.

For more mutual fund trends and analysis, please visit Market Realist’s Mutual Fund page.

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